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Five Steps to Check Your Credit Situation Mid-Year

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Three generations of a family on holiday walking along the dock of a luxury marina.It can be easy to lose sight of your New Years financial resolutions by mid–year. When summer comes and all you want to do is relax, many people relax with their finances as well. If you’ve gotten off track or are not even sure where you stand, the finance experts at Equifax recommend that you do a mid-year evaluation of your credit situation.

To get back on track with your financial goals and eliminate wasteful spending, consider taking the following steps recommended in the recent Equifax blog, “Five Mid-year Credit Moves to Make Right Now.”

  • Step One: Check your credit report.

o   When you evaluate your credit report, check how much debt you have outstanding on your credit cards versus the total of your credit limits. This is what finance experts refer to as the credit utilization rate, or credit utilization ratio. It’s ideal that your credit utilization rate be between 30 and 35 percent or less, as this indicates you have not over-borrowed on your credit cards.

  • Step Two: Look for errors and address any issues with your report.

o   Once you get your credit reports, look over them carefully to make sure there is no inaccurate information or that you are not the victim of identity fraud. If you discover any errors, you can dispute them for free. If you need assistance to discover any errors, a credit monitoring service can help.

  • Step Three: Set up reminders to pay bills on time.

o   Once you evaluate your credit report, you can now focus on your credit score. Your payment history is the most heavily weighted factor in determining your credit score (typically about 35 percent), so paying all of your bills on time is crucial.  For some bills, you may be able to set up automatic payments. If you don’t like the idea of that, you can set up a reminder on your phone or computer calendar to remind you to pay your bills.

  • Step Four: Pay down debt.

o   Most debt can impact your credit score, both from a credit utilization and a credit utilization ratio perspective. And of course, debt typically costs money—you pay interest as long as the debt isn’t paid off at the end of the billing cycle. Many experts advise paying down debt with the highest interest rate first, as this typically saves the most money in the long run.

  • Step Five: Assess your accounts.

o   Lenders can positively impact your credit score, and having several active and current credit accounts shows them that you’re a responsible borrower. And if you’ve had a long-standing account, it can help demonstrate a longer credit history, which is why it is not a good idea to close every account once you have paid off your credit card balance.

Taking a break from the financial stress of everyday life can help you unwind, but don’t relax your vigilance regarding your credit. Making these five moves will help you stay on top of your credit situation.

Loans for Home Renovation: Do or Don’t?

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Hammer on Stack of MoneyMany homeowners that need to complete a home renovation debate taking out a loan or using their savings to cover renovation expenses. Two popular options for those not wanting to tap into their savings are a home equity loan or a home equity line of credit (HELOC).

What’s the difference? A home equity loan is similar to a mortgage in that you are given a specific amount that you must repay over time in fixed monthly payments. A HELOC is a line of credit that you can use when needed as long as you don’t exceed the credit limit. There are monthly payments with a HELOC, but you may be able to make interest-only payments for a period of time.

A home equity loan or HELOC can be a good route for some people, but first you should ask yourself the following five questions that the finance experts at Equifax discuss in the recent article, “Paying for Home Renovations: Tapping Home Equity vs. Using Savings,” to find out if you are in a situation where taking out a home equity loan or a HELOC would be a smart financial move for you.

  1. How much debt do you already have?

If you already have a great deal of debt, especially debt that has a high interest rate, you should evaluate whether you can take on any additional debt at this time.

  1. How much equity do you have in your home?

If you have less than 20 percent equity in your home, it might not be a great idea to borrow against it for three reasons. First, if you are paying private mortgage insurance, it is good to eliminate that payment first. Second, many lenders want you to have some stake in your home and will not let you borrow if you have less than 20 percent equity in your home. Third, you could potentially lose a significant amount of money if you put yourself in a financially unstable situation and your home value drops.

  1. How much are you thinking about borrowing?

Getting a home equity loan is similar to getting a mortgage and involves similar start-up costs such as an appraisal, an application fee and closing costs. Be prepared to pay these costs and also be aware that home equity loans can carry adjustable rates and your monthly payments could go up over time.

  1. How much cash do you have?

If you don’t have enough in savings and do have a significant amount of equity in your home, a loan or HELOC would be a good option for you, especially since interest rates are so low right now. If you have a lot of cash in savings, it is probably not worth borrowing money that you will have to pay back with interest, unless the home renovation would eat up all of your savings and leave you with no emergency funds.

  1. How long do you plan to stay in the house?

Keep in mind, if you are doing a home renovation with the intent of selling before you have a chance to pay off the loan, you should consider having another means of paying off the loan. This is because when you choose to tap into your home equity, you are using your home as collateral, and if you sell your home, that collateral disappears.

In the end, whether you decide to use savings or borrow money with an equity loan or HELOC for your home renovation, keep your return on investment in mind and make sure the investment is worthwhile.

For more tips, visit the Equifax Personal Finance blog.

 

 

Learn to Dispute Charges on Your Credit Report for After Shopping Season

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Check credit after holiday shoppingAfter all is said and done with holiday shopping, even if you were very careful with credit card usage, staying close to budget and being a responsible borrower, there is still a chance for errors to end up on your credit report. Some of this may be errors, or it could be fraud, and it is important to know how to report and resolve the issue. The credit and finance experts at Equifax share information about what to do when you find errors on your credit report, after the holidays or otherwise, in the new article, “

How Do I Dispute Information on My Credit Report?”

First, you want to carefully look over your credit report for all activity. If you spot something off, you need to dispute it with the credit reporting agency right away. The dispute is free of charge, and depending on the agency, you may have to call or send in the dispute by mail. Equifax offers free and easy online disputes. If you send in a dispute and it is resolved, the one credit reporting agency will notify the other two agencies of the corrected information. If you want to have the most up to date information though, in the case of needing to have a spotless report for an application for a mortgage in Atlanta or the like, you should contact each agency independently and immediately.

After you report your dispute, the credit agencies are legally required to investigate within 30 to 45 days, and before the time has elapsed, the credit agency will inform you of their findings. From there, the disputed item will either be removed or the reporting agency will explain that the findings of their investigation lead them to keep it on.

Even if the disputed item wasn’t removed, you should keep a close eye on your credit report going forward and dispute as necessary. If you are concerned about activity on your credit file (due to identity theft or potential identity theft), you may want to sign up for a credit monitoring service like the Equifax Complete plan.

For more information about protecting your credit score and more

personal finance advice, check the Equifax Finance Blog.

Do I Need Identity Theft Insurance?

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Faster recovery with identity theft protection

Faster recovery with identity theft protection

You’ve probably seen advertisements for identity theft insurance. Have you wondered what it really is and if it’s something you need?

The insurance pros over at the Equifax Finance blog recently covered the topic of identity theft insurance in the article, “

Do I need Identity Theft Insurance?”

Here’s the rundown: Identity theft insurance is niche insurance, for those people who are concerned about the costs involved with repairing their identity should a theft ever occur. Recovering from identity theft can be costly in time and in money. Identity theft insurance can’t actually stop a theft, of course. It just helps reimburse individuals for the costs of restoring their identity, like phone bills, lost wages, notary costs, certified mail costs, and possible even attorney’s fees. The insurance also usually provides access to services that can also help. If you are interested in purchasing identity theft insurance, be sure you know what you are buying. Get all the details on policies from several different companies, comparing price, coverage, limits and deductibles.

If you have been a victim of identity theft, call one of the three major credit reporting agencies to request a fraud alert (whichever agency you contact will alert the other two agencies, so you only need to call one). Order a copy of your

credit report so you can see what is going on.

Get more identity theft protection information at the Equifax Finance blog.

When Can You Buy a Home After a Foreclosure

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By recovering your credit ratings after foreclosure, you can become a homeowner again.

By recovering your credit ratings after foreclosure, you can become a homeowner again.

Many Americans were forced into a foreclosure or short sale over the past few years due to job loss, decreased incomes and declining home values. The market is recovering now and homeowners who did fall victim to foreclosure or short sale may now be wondering when they will be able to purchase a home. The real estate pros at the Equifax Finance blog addressed this question in the recent article, “

Can I Buy a Home After a Short Sale or Foreclosure?”

According to the article, when is the right question, not if. Homeownership is a smart idea but buyers will have to demonstrate the ability to pay for a mortgage with proof of sufficient and stable income, the willingness to pay based on credit ratings and the ability to provide a sufficient down payment. But when depends on individual circumstances. In order to buy a home again, “you must focus diligently on improving your credit and saving money.” There are five variables that go into your ability to secure financing on a home:

  • Duration of delinquency – the longer your short sale or foreclosure proceedings took, the worse
  • Deficiency judgments – how much unpaid negative debt you were left with on your

    credit ratings after your short sale or foreclosure

  • Interest rate – a lower credit score may mean a higher interest rate, which can make a big difference on a major purchase like a home; waiting until you can get a better interest rate can save you thousands of dollars
  • Down payment – a higher down payment may be required; some rules require down payments of up to 20 percent (saving that much will take some time)
  • Waiting period – many major investors and mortgage insurers have set rules on how long a borrower has to wait after a foreclosure or other housing problem, from two to seven years, depending on your situation

Get the full article on the Equifax Finance blog, and while you’re there, get more personal finance advice on topics like retirement, taxes, credit and more.